Bill White’s Bottom Line

The former Houston mayor hopes to bring his business acumen to the governor’s mansion. Is that a good thing?by Dave Mann Published on Wednesday, June 9, 2010, at 5:21 CST

Photo by Michael Stravato

Bill White, Democratic candidate for governor, in downtown Houston.

Observe enoughTexas politicians over the years, and you come to expect certain things. Smooth banter and wit are a must, as are folksy anecdotes. A good head of hair doesn’t hurt. Neither does the ability to talk for hours without saying anything of substance. Above all, Texas politicos must be charming. Bill White possesses none of those traits.

The Democratic nominee for governor and former three-term mayor of Houston is a remarkably genuine politician. Ask him a question and he’ll likely tell you what he actually thinks. His answer will be thoughtful, deadpan and likely consist of at least three demarcated segments, followed by a brief summation of the main points. He rarely retreats to the safety of talking points. His sincerity is endearing. At the same time, his efforts at small talk are tortured. His suits can be rumpled and ill-fitting (on the day I met him for an hour-long interview in mid-May, White had forgotten his belt). His ears are positively Vulcan-like. He is bald.

So when the candidate and his supporters claim, as they often do, that White isn’t a “career politician,” they have a point in one respect: In his speech, appearance and bearing, White is the antithesis of what most Texans have come to expect from their politicians—and a stark contrast with the man he’s trying to defeat, nine-year incumbent Gov. Rick Perry. In other ways, White is very much a typical politician, having spent many years in and around politics on the state and national level, and having long harbored high political ambitions. He just doesn’t look or sound the part. No one—outside the Perry campaign—will ever accuse Bill White of being another Slick Willie. What he does have is a lawyer’s insistence on precise detail, a policy wonk’s thoughtfulness and ability to see all sides of an issue, and a businessman’s eye for opportunity.

It’s that last trait—his business acumen—that White hopes to parlay into four years as governor. When he claims he’s not a “career politician,” White’s really arguing that while he’s in politics, he’s not of it—that, at heart, he’s still a businessman who will bring a good businessman’s competence, sensibility and foresight to the governorship.

“In business, you’re accountable in the marketplace every day,” White says. “You’re used to the discipline of listening to your customers.” In this analogy, of course, the customers are the voters and people of Texas. “I have a good friend, John Hofmeister, who ran Shell [Oil] USA. He did something that I did as mayor and that I also did when I was in business, which is he personally read the customer complaints. Because he wanted to let people know that you’re not as good as your press release. You’re only as good as your customers think you are.”

So how good is he? White has had quite a few successes in business. He’s been a serious player in the energy industry, particularly in natural gas and oil extraction. For six years before he became mayor, White headed the Wedge Group, a holding company that during his tenure nurtured successful ventures in energy and real estate. There have been failures as well: The energy company he launched in 1996 has sputtered in its attempts to pump oil from the Caspian Sea, costing investors millions.

Then there are business dealings that raise ethical questions. White has forged a close relationship with a drilling company named BJ Services, including serving on its board while he was mayor. He pocketed $2.6 million from BJ Services in the past seven years. Elected officials usually don’t earn that kind of money in the private sector while still in government. He’s also received campaign contributions from the company’s president. Meanwhile, critics point out, White’s position on natural gas drilling in North Texas—in which BJ Services is heavily involved—would greatly benefit the company if he becomes governor.

His ties to the drilling outfit surprised some of White’s liberal supporters, but it shows what an interesting hybrid he is: An oil and gas man who was a member of the Greater Houston Partnership—an industry group that’s the very epicenter of big business in Texas—but also a politician whose record as Houston mayor was largely progressive. He worked to clean the air in Houston’s pollution-choked East End, to build affordable housing and, most famously, to house hundreds of thousands who fled Hurricane Katrina. He’s a progressive Democrat who won’t hesitate to crack down on big-business leaders when he feels they’re acting in bad faith, but who prefers to work cooperatively with them. After all, he understands where they’re coming from.

Of course, many candidates have trotted out the businessman-turned-politician trope over the years. But in White’s case, it’s not just a campaign slogan. Those who worked with him and observed his tenure as Houston mayor describe his governing and policy-making style as, above all, business-like: ready to tackle problems swiftly and head-on. If a program is over budget, White’s first instinct is to cut costs. He believes that government’s primary role is to serve its customers—the taxpayers. When White says he would run Texas government like a CEO, voters should believe him.

So for Texans trying to decide what kind of governor he’d make, the key question is this: Just how good a businessman is Bill White?

White’s career has long centered on energy—how to find it, get it and profit from it. He wrote his senior thesis at Harvard on natural gas production. When he was a young legislative aide for Texas congressman Bob Krueger in the 1970s, Congress was passing some of the nation’s first major energy bills. Even as he earned his law degree from the University of Texas at Austin and spent 14 years as a litigator, working mainly on anti-trust and corporate law, White remained fascinated with energy policy. As an attorney, he represented both energy companies and private citizens fighting industry. He also helped investigate the cause of several accidents, including a gas-well blowout in Mississippi. Investigating accidents, White says, “You learn a lot about drilling for oil and gas.”

This work led to his first political break. White’s firm, Susman Godfrey, had represented the state of Arkansas in an anti-trust case. In early 1991, White met then-Gov. Bill Clinton just as he was gearing up for his first presidential run. White went on to raise millions for the campaign, and his efforts and connections helped him score an appointment as deputy secretary in Clinton’s Department of Energy in 1993. Suddenly White was helping oversee a department with more than 140,000 employees and a budget of $19 billion.

“I was a big believer that the United States needed a more secure, affordable and sustainable energy policy with less foreign imports and more domestic energy,” White says.

But he also pushed the United States to develop oil in the Caspian Sea. He traveled to the Caucasus a handful of times, partly to cajole the leaders of Armenia and Azerbaijan—bitter long-time enemies—to work out some of their differences and open the region for oil production.

White says those negotiations showed his diplomat’s skill for bringing opposing sides together—whether it’s trying to get Central Asian leaders to agree or working with energy executives in Houston to lower emissions—or, he hopes, bargaining with Texas legislators. “It’s often the case that people you think would be bitter antagonists are seeing the same circumstances or drawing the same conclusion,” he says. “Then it’s a matter of mobilizing the constituencies behind those legislators, with their help, in order to accomplish a common goal. That’s what real leadership means. That’s what we’re lacking as governor.”

After he left the Energy Department in 1995, White returned to Houston to launch his own company, Frontera Resources. This began perhaps the most disputed part of White’s business career—and the least successful. Frontera set out to extract oil from the Caspian Sea. It struck one of the first production-sharing agreements in the region, with the Azerbaijan state oil company. Those efforts engendered criticism. In a spring 2000 story, Mother Jones ripped Frontera—and singled out White—for working with Central Asian strongmen, especially President Heydar Aliyev of Azerbaijan.

“According to [Human Rights Watch], his government tortures prisoners, detains journalists, and suppresses opposition parties,” the magazine wrote. “Despite such abuses, White and his company portray Aliyev as a bold reformer.” During his first (successful) campaign for Houston mayor in 2003, White was also criticized for trying to use his experience in government, and his contacts in Central Asia, to profit with Frontera.

White has continually denied that he did anything improper. “Certainly the knowledge that I gained as a deputy secretary of energy of the United States helped me handicap what every international businessman does,” he says. “In every international business, there’s political risk—to what extent is a country going to be stable, in what direction is the public leadership in. That’s not inside information. It’s knowledge of the countries of the world. There were no guaranteed returns.”

Indeed, the venture wasn’t nearly as profitable as White had hoped. The production deal in Azerbaijan faltered, and Frontera eventually defaulted on a large loan from the European Bank for Reconstruction and Development, which aided projects in former Soviet republics. Investors lost millions on Frontera. The company is still developing oil projects in Central Asia, but White no longer has any role—he stepped down as CEO in 1997 and left the board of directors in 2001, though he still holds stock valued at $11,000, according to his campaign.

White found more success in his next role—running the Wedge Group, a Houston-based holding company. Wedge isn’t your typical investment firm. It doesn’t flip companies for quick profit. The firm’s motto is “Time is the most valuable asset,” and Wedge boasts in promotional materials that it gives investments “time to mature and gain in growth.” Wedge has owned some of its ventures for decades before selling them. White took over as CEO in 1997 and left only when he was elected mayor in 2003. He scoured the market for good investments, primarily in energy and real estate. Under White’s tenure, Wedge nurtured seven or eight ventures at any one time. He still retains an ownership stake in a Wedge spinoff called BTEC Turbines, from which White earned more than $160,000 in 2009, according to his tax returns.

(Just as this story was going to press, the White campaign released the candidate’s tax returns from his time as mayor—after refusing to do so the past three months. The tax records show White made $556,000 in 2007 from his investment in BTEC Turbines. In 2005, White recruited BTEC to supply emergency power to a Houston-area water station following Hurricane Rita, according to the Associated Press. A spokesperson for White said the then-mayor had no financial ties to BTEC at the time of Hurricane Rita, and his later investment in the company was unrelated to its hurricane recovery work. Read more details on White’s ties to BTEC Turbines here.)

Much of White’s work at Wedge proved profitable for the company. One venture that prospered was a Tyler-based outfit named Howe-Baker International, which produces oil-refining equipment. The firm was eventually sold off, but White’s tenure was a very profitable time for Howe Baker, says the company’s former CEO Ron Brazzel. “He’s not a knee-jerk reaction kind of guy” says Brazzel, a life-long Republican who’s supporting White for governor. “He’s a very good strategic thinker. He could see both sides of an issue. He’s very, very thoughtful.”

It didn’t take long for White to show how he would translate his business background into a governing style. In early 2004, just months into his tenure, White confronted his first major crisis as mayor of Houston. His administration had inherited a city pension system that was a mess. The system had a projected shortfall of hundreds of millions per year and was threatening to swamp the city budget. White proposed cuts in the both the civilian and police retirement systems, including reducing benefits for some long-time city employees. City workers were furious, but the cuts helped avert a deeper crisis.

“He moved very quickly and decisively—and very much, I think, as a businessman would have done, which is, when times are bad, you cut your costs,” says Bob Stein, a political science professor at Rice University. “He incurred enormous wrath from public employees. It’s not what a [conventional] politician would do.”

Stein has been closely observing Houston mayors for three decades. His political science students often conduct policy research for the mayor’s office, and his wife has worked as an agenda director for several mayors, including White and his successor, the newly elected Annise Parker. White’s governing style and approach to decision-making—one focused very much on the final goal or bottom line—was unlike any Stein had seen before. “Because he was a businessman, he did things in ways that I thought were very different,” Stein says. With the pension cuts, White showed that he was willing to implement what he thought was the right policy even if it wasn’t politically popular.

The cuts may have been sound fiscal policy, but they didn’t entirely shore up the pension system. White’s administration borrowed money to help paper over the remaining pension shortfall. In 2003, the Legislature had allowed cities to issue so-called pension obligation bonds—essentially borrowing money to cover pension obligations. From 2004 to 2008, the city borrowed more than $500 million to cover pensions. Parker ended the practice in her first budget as mayor. When she presented the budget to city council, Parker said, “It is also the first budget in the last five years that has not used pension obligation bonds to balance it. I have long been uncomfortable with the idea of using debt for current obligations. And you will see that our debt payments are down as a result of that.”

You can now find that quote on Gov. Perry’s campaign site. The Perry people are using Parker’s comments in an attempt to shred White’s self-characterization as a competent businessman. They claim that White left the city with a budget deficit, and call White’s handling of the Houston budget “Enron” accounting.

That’s a wild exaggeration. Obligation bonds are a legitimate and legal budget technique, though there’s a debate over whether they should be used. White’s campaign has defended the bonds and argued that the city’s budget was balanced during his tenure. (In the strictest sense, the budget was balanced, though with the help of the bonds.) Some White supporters have also noted that Parker didn’t publicly object to the bonds during the past five years, when she was the city’s controller. Nonetheless, Perry’s criticism of White’s fiscal bona fides—aided by the remarks from Parker’s office—appears to have hurt White politically.

(A spokesperson for Parker said the mayor didn’t want to interject herself into the governor’s race and wouldn’t comment on Perry’s use of her comments.)Stein says the obligation bond issue isn’t black-and-white, especially if White thought the economy would continue to bloom. “You can debate both sides of it. But it’s clearly something a businessperson would be OK with if you were bullish on the economy, which he was.”

In nearly every major decision or initiative during his six years as mayor, White took a similar business-like approach
He raised public and private funds to create Discovery Green, a 12-acre park on the lip of downtown. White believed—correctly, as it turned out—that well-maintained green space would spur private development in the area. Then there’s the crisis for which he’s best known—taking in the estimated 200,000 Louisiana residents who fled to Houston in August 2005 after Hurricane Katrina. White’s foresight and understanding of the private sector again were on display. The mayor realized from the start that many Katrina evacuees would never return to New Orleans and would need permanent housing. White’s office worked directly, and successfully, with landlords to find apartments and permanent residences for tens of thousands.

In 2006, White decided to take on the city’s major petrochemical facilities over property taxes. Houston’s sprawling refineries and chemical plants had been paying below-market tax rates for years. The companies had long fought paying higher taxes and, with their deep resources, usually trounced the county tax appraisers in court. Though the mayor technically has no role in property valuation, White decided he could help. He arranged meetings in the mayor’s office between the county tax assessor’s office and the heads of the city’s largest refiners, Shell Oil, ExxonMobil, Lyondell and Pasadena Refining. He even chartered a flight to San Antonio to meet with executives from Valero, according to the Houston Chronicle.

White was the moderator at these meetings. According to Chronicle accounts at the time, he told the executives that he knew they wanted to stay out of court and pressed them to agree to fair land values. Shell, headed by White’s friend John Hofmeister, was the first to strike a deal. The county number-crunchers later reached similar agreements with ExxonMobil and Lyondell. (Valero, despite White’s personal visit, held out.)

The businessman-mayor took a similar strategy in trying to reduce pollution. White reached out to industry leaders to sign pollution-reduction deals, arguing that it was in the companies’ interests to set emission goals well into the future. And he was determined to cut down on the release of carcinogens like benzene and butadiene into Houston’s air. Some companies were more receptive than others—and some that did strike agreements didn’t follow through on their promises to curb emissions. White then showed that he was willing to fight. With limited success, he tried to use the city’s nuisance ordinances to compel polluters to reduce emissions, while also imploring state environmental regulators to crack down on the recalcitrant polluters.

Even in the day-to-day operations of the city, White preached sound business principles. He bought his staff the book The Price of Government. “[The book] was about squeezing the value out of each tax dollar,” he says, “and how there was a limit on what anybody could pay for anything whether it be your car, your house or a subscription to a periodical, and the same is true of government. One of the challenges our country has is trying to get the most value out of each of those dollars.”

That last quote might be Bill White in a nutshell—competent, thoughtful, insightful and, well, kind of bland. Making the most of each tax dollar might be a recipe for good government, but it won’t have anyone chanting “yes, we can” at campaign events. Still, his approach made White wildly popular in Houston. “I’ve been polling here since ’79,” Stein says, “and he’s gotten the highest ratings of any incumbent mayor I’ve ever seen.” White left office with an 84 percent approval rating.

But that was last fall, before Perry’s campaign started its barrage of press releases and negative Web ads, and before the recent revelations about White’s relationship with BJ Services. “Of course,” Stein says of White’s popularity, “it’s dropped quite a bit.”

In March, just days after White won the Democratic primary, the Houston Chronicle reported that throughout his three terms as mayor, White served on the board of BJ Services, a Houston-based energy services company that specializes in drilling for natural gas. White has earned more than $2.6 million in total compensation from BJ Services. Much of that money came from payments for his service on the board. But White also owns more than 10,000 shares of BJ Services stock, according to his financial disclosures, and $245,000 in stock options.

BJ Services was recently bought out by the oil-field services company Baker Hughes. As of April 30, when the sale was finalized, White was no longer on the BJ Services board, according to his campaign. But he’s still financially tied to the company. BJ Services stockholders, including White, received nearly $1 billion in cash from the stock merger and also hold more than $6 billion worth of shares in the new merged company, according to documents filed with the Securities and Exchange Commission.

It’s rare for big-city mayors—or public officials of any kind—to be so closely aligned with a large corporation. A Dallas Morning News survey of mayors of the nation’s 10 largest cities found that only three, White included, served on corporate boards. “I wanted to keep a business involvement, to keep my hand in business, because I enjoy business. It still is a great company,” White says. There was no conflict of interest between city business and BJ Services, he says.

The state of Texas, however, approves and regulates natural gas drilling done by firms like BJ Services. Now that White is running for governor and remains invested with BJ Services, the potential for conflicts of interest is greater.

For instance, BJ Services has drilling contracts for more than 2,000 wells in the natural gas-rich Barnett Shale formation in North Texas, according to the company. Drilling in the Barnett Shale has become increasingly controversial. Residents and environmentalists have protested that the process used to extract the gas—hydraulic fracturing, in which a combination of salt water and other chemicals is injected into rock—has led to pollution of ground and surface water with benzene and other carcinogens. BJ Services is part of a current congressional inquiry into fracturing.

The industry says the risks of fracturing are minimal. But some landowners near drilling sites have submitted soil samples from their properties for testing and found elevated levels of carcinogens. Some activists have called for a moratorium on drilling. Others have called for tighter restrictions so that the drilling doesn’t pollute drinking water supplies. Mayors and city councils in communities all over North Texas—some in typically Republican areas—have turned against the drilling.

Sharon Wilson, an activist who lives in Wise County and has been advocating for safer drilling practices, has invited White to tour the area. She said she doesn’t think anyone can understand the situation unless “you see it for yourself on the ground and you see what’s going on.” The White campaign hasn’t responded to her offer.

White opposes a drilling moratorium. It’s not a surprising position for him, given his background in the industry. But it does leave him open to criticism. A drilling moratorium in the Barnett Shale would be financially damaging to BJ Services. Moreover, the company’s CEO, J.W. Stewart, and his wife have given $50,000 to White’s campaign so far, according to campaign filings.

“I’ve believed strongly, and I do believe, that natural gas and unconventional gas should be an important part of the energy mix,” White says. “I think it’s critically important if we want to have cleaner air, if we want to have a growing economy and we want to cut our dependence on foreign oil, then domestic natural gas is a very important part of that. Period.

“Now, we should have good environmental standards and practices, and companies should abide by environmental standards, and, in particular, if there are detections of excessive amounts of benzene—I’ve heard most are in connection with a processing plant—there ought to be a standard, it ought to be applied, it ought to be monitored, and they ought to be shut down if they don’t apply to the standard.” White says the failure to have good standards and strict regulation lies with the Texas Commission on Environmental Quality and the Railroad Commission.

The Perry campaign is sure to use the BJ Services connections against White; the incumbent governor’s campaigns historically have been devastatingly effective at portraying their opponents negatively. Perry’s people have already done a job on White over his refusals to release his tax returns prior to 2009 and continually assailed him as a “liberal trial lawyer.” It’s not surprising that White’s polling numbers, even in Houston, have begun to drop.

White fully expects Perry’s campaign to make BJ Services an issue in the campaign. But he also notes that the governor’s campaign recently sent out a fundraising letter that labeled White an enemy of the Texas energy industry. “So he’ll talk out of both sides of his mouth.”

That might have been White’s best line in our hour-long interview. When you talk with him, it’s hard not to wonder if statewide voters will flock to him. As in business, there’s a supply-and-demand in Texas politics. Most successful candidates have charm and charisma—what the late Molly Ivins used to call “a little Elvis”—because that’s what people want. Like it or not, that’s what wins.

White believes that his record of success in business and in government will win people over, even if he’s not the most charismatic guy in the race. It’s a difficult pitch. Despite all Bill White’s success in business, his toughest sales job yet may be himself.

Dave Mann has been with the Observer since 2003. Before that, he worked as a reporter in Fort Worth and Washington, D.C. He was born and raised in Philadelphia. He thinks border collies are the world’s greatest dogs, and believes in the nourishing powers of pickup basketball.